The banking sector in India is one of the crucial parts driving the economy. Banking is usually one of the crucial economic devices for any country but, for a developing country such as India, it is even more important due to the impact it has had on the Indian market and reforms in the banking sector have been crucial to the betterment of Indian financial sector as a whole. Since independence in 1947, Indian banking has seen crucial reforms that define the current banking system in India. The reforms to Indian banking are carefully monitored as to the effect they have on the Indian economy. Reforms are crucial to anything as time progresses, but banking reforms are tricky as they require using huge resources to implement the reforms. But, reforms are essential, and they have played a huge role in the economy.
Reforms are crucial to resource mobilization and generate growth. Financial reforms are crucial for the economic stability of any country. The most important year for banking reforms in India is 1991. Before 1991, India was not a stable economy and had constant ups and downs. But, in 1991, India started on a new era of economic reforms which led to privatization, liberation, and globalization of the Indian economy. Before 1991, India was an isolated economy with very little foreign trade and almost no connection to the outside world. The reforms got a boost from the recommendations of various committees such as the Vaghul Committee, Narasimha Committee, etc. The first Narasimha committee was the one that gave a blueprint for the Indian Banking system. From these recommendations, the Indian government launched a comprehensive liberalization program for the Indian banking system which set into motion the creation of the new banking sector in India.
The process of computerizing all branches of banks began in 1993 which is a landmark in itself. From then, many events have ensured that today, all banks use computers in all their branches. The NSE or National Stock Exchange began operating in 1994. New technology and new schemes have been taken up by banks to attract customers, and this has led to even more reforms in the banking system of India. Banking sector reforms aren’t a thing of the past but are still going on. They’re an ongoing process, and some of the most recent reforms include deregulation of interest rates, payment banks, Regulation of non-banking finance companies, increased autonomy to banks, etc.
Banking sector reforms are still crucial to the Indian economy, and with experts suggesting changes frequently through committees such as the Narasimha committee, which has played a huge part in many significant banking reforms in India, a lot of changes are being proposed, and the government is monitoring each suggestion with scrutiny. As the Indian economy depends on the banking sector heavily, the reforms to it are very crucial and taking a wrong, or risky move will prove to be very costly to the economy. Hence, the reforms might not be taken up frequently but are only implemented after scrutiny and with the help of some of the greatest economic minds of the country. Banking sector reforms have only proven to strengthen our economy, and we can expect many more reforms shortly.